Research On Product Warranty And Pricing Of Remanufactured/remanufactured Systems Led By Remanufacturers

Warranty policy for new and remanufactured products is an effective means to enhance sales volumes and improve firms’ profits in a manufacturing/remanufacturing system.This paper aims at a TPR(Third Party Remanufacturer)-remanufacturing system in which the TPR acts as the channel leader.The OEM(Original Equipment Manufacturer)and TPR can choose to provide warranties for new and remanufactured products,respectively.Based on this,the warranty decisions,pricing strategies and equilibrium profits of both parties under four warranty modes(no product warranty,only OEM provides warranty for new products,only TPR provides warranty for remanufactured products and OEM and TPR provide warranties for new and remanufactured products,respectively)are explored revolving around two decision-making structures(competition and cooperation).Then a comparative static analysis is conducted between no-warranty mode and the other three warranty modes and two decision-making structures of competition and cooperation.The results show that:(1)In the competitive situation,when the sensitivity coefficient of product warranty is relatively higher,the TPR’s warranty for remanufactured products can improve its own profit on condition that the benefit of the OEM is not hurt.When the consumers’ preference for the remanufactured products is relatively lower,there exist higher collection rates that can realize “win-win” situation under the case that both parties provide warranties for their products;in contrast,when the consumers’ preference is above the median level,both parties suffer losses under this warranty mode.When the sensitivity coefficient of product warranty is relatively lower,it is uneconomical for either of both parties to provide product warranty.(2)In the cooperation situation,when the OEM engages in new product warranty,if the consumer’s preference for remanufactured products is at/above the medium level or the consumer’s preference is relatively lower but the collection rate exceeds the corresponding threshold,the OEM can benefit from new product warranty.The benefit area of TPR in this warranty model is completely opposite to that of OEM.The TPR’s warranty for remanufactured products gives the OEM a free ride,which is conducive to the improvement of OEM’s profit.On the contrary,it leads to the profit loss of TPR himself.When both parties provide product warranties,the TPR still suffers profit loss compared to no-warranty mode,while the OEM can only benefit under the conditions that consumers’ preference is relatively higher,or the consumer preference is in the medium level and the collection rate is lower than the corresponding threshold.Hence,when the TPR implements remanufactured product warranty,the OEM,as the direct beneficiary,should not provide new product warranty.Otherwise,the warranty effects of two-type products will offset each other.In addition,the OEM and TPR can not achieve win-win situation in the cooperation case without profit coordination mechanism.(3)For any given warranty mode,the prices of two-type products under cooperation situation are higher than those under competition situation;on the contrary,the warranty levels of products under cooperation situation are lower than those under competition situation.The TPR is willing to cooperate with OEM,whereas the OEM has no cooperative motivation.A higher consumers’ preference for remanufactured products is more conductive to promote cooperation between the two parties.Under this case,the TPR,as the dominant player,should adopt the corresponding profit increment distribution mechanism to realize Pareto improvements of both parties’ profits compared to no-warranty mode.The above conclusions have certain reference values for firms’ warranty decisions of new and remanufactured products in practice.